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The price which the purchaser pays is well supported by the lot's presently appraised value. Because of our emphasis on the utility of the lots and because of reliance on local media of advertising, almost all purchasers come from a rather localized radius and many elect to build their permanent residences there. Perhaps the most cogent testimony we could advance as to validity and wholesomeness of our product offerings is the fact that our percentage of market penetration varies directly with proximity to the subdivision.

Whether purchasers come from across state lines is strictly a geographic accident of the particular location. At our Illinois and Ohio developments, for instance, only two or three purchasers have been from out of state, while at our Indiana development because of the happenstance of its location near the Illinois state line, we anticipate drawing significantly from the Chicago market. The question we should like to pose is what legitimate interest under these circumstances does the federal government have in regulating a business like ours? None is our emphatic answer to this question.

If, however, there is to be regulation, we would propose the following as standard exemptions : If a seller of land does business in more than one state but complies with the laws of all those states in which he does business, his activities should be exempt, as having to comply with a federal statute as well would involve needless over-regulation. Real estate is an inherently local activity, and if the developer has complied with the laws of every state having any conceivable interest in his transactions, then the federal government has no legitimate function to fulfill.

Also, where every customer of a developer has seen his property before making his purchase, there should be no federal regulation, regardless of the purchaser's place of residence, in state or out of state.

And, in cases where purchasers haven't seen the property but are so close to the property and have easy and convenient access to it for purposes of inspection, then again there should be no regulation.

As for the act, itself, seriously misconceives the nature of real estate by characterizing it as a fungible (in the nature of a security). In legal contemplation, real estate is not a fungible, and as a matter of actual physical fact real estate is not. When real estate is viewed in its true light, it would make as much if not more sense to put this proposed bill under the Department of Housing and Urban Development or under the Departments of Agriculture or Interior as it would under the S.E.C.

The non-fungibility of land perhaps more than anything else makes for the awkwardness of a securities act take-off. Each parcel of land is separate, unique and identifiable by its own peculiar characteristics. Unlike securities, each of our lots is individually priced and often is repriced during the course of the offering.

Another important distinction is this: The relationship between the buyer and seller of land and the relationship between the issuer and buyer of securities is fundamentally different, and therefore it is not appropriate that they be regulated by the same legal principles. In the case of the sale of land, the relationship is simply that of buyer and seller of a simple product. In the case of the issuance and sale of securities, there is more than a purchase and sale transaction; there is in the case of the issuance and sale of equity securities an invitation by the issuers to join them as coventurers in the carrying on of the business. Under these circumstances, it makes sense to impose on the part of those who control the issuer fiduciary obligations of the type long recognized by the common law in the partnership context. However, in the case of the simple purchase and sale transaction, it would be, we submit, an unwarranted invasion of the freedom of the market place to impose fiduciary-type liability on the principals of land developers.

The unfairness of imposing this burden is vividly underscored when one examines the legislative history of this proposed bill. Not only is the developer to be made responsible for its own acts or omissions, but also he is to be made responsible for the acts of his agents. Curiously, however, the most recent draft of the proposed law has dropped the requirement of registration of salesmen, and this, despite the fact that experience has shown that what few abuses that take place in the vast volume of land transactions in this country far more often can be traced to an overly ambitious salesman rather than to a conscious design on the part of the developer to engage in a practice of fraud or deceit. The commitment of the developer who is in business for the longer term is simply too great to permit him, even if he were so inclined, to engage in such practices.

As a final point, we would urge that the incidence of abuses is not such as to warrant the passage of a prophylactic measure of general application, when what is sought is to curb the very few who are alleged to be lacking in scruples. A sharp scalpel is required for this job, not a blunt instrument. There exists through the Federal Trade Commission, the Postal Department, State Statutes, common law remedies, chambers of commerce, and better business bureaus alternative means of dealing with this problem. The collective economic waste which would be represented by the arduous task of compliance by the entire industry carries too high a social cost to justify whatever benefit would be derived through passage. Far cheaper it would be to turn loose a task group from the F. T. C. and the Justice Department to ferret out and to deal with the unscrupulous few in cooperation with the state and local enforcement authorities. Alternatively or additionally, the postal fraud laws could be streamlined to facilitate greater use of the injunction remedy at an earlier stage of an unscrupulous promotion; and as suggested by many others during these hearings, it could be made a violation of federal law to sell land in interstate commerce in violation of state laws.


Huzzah, Mo., June 17, 1966. Hon. STUART SYMINGTON, Senate Office Building, Washington, D.C.

DEAR SENATOR: Senator Long is a member of the sub-committee, which is holding hearings on Senate Bill No. 2672. This bill was introduced by Senator Williams of New Jersey. The overall purpose of the bill is to bring under Federal Regulation the advertisement and sale of lots in subdivisions. It is my understanding that in the States of Florida and Arizona, the sale of lots in subdivisions has become somewhat of a racket and that the purpose of this bill is to require all subdividers who might do interstate advertising to register and qualify with the Securities Exchange Commission and comply with numerous Federal requirements.

It is my thought that this is a matter that should be handled by the various State governments, and I understand that both Florida and Arizona are in the process of enacting legislation designed to take care of the situation. I see no reason why the whole nation should be encumbered by such regulations. With the coming of the Meramec Basin lake, we are going to have many subdivisions developed in this area, and I can see where this Federal regulation is going to be a great detriment. If they would confine the law, so that it would not apply to developers who advertise in the State where the development is located, together with adjoining states, this would better the situation. However, to make it a wide open proposition is going to cause much expense, difficulty and will hinder development.

I am not personally acquainted with Senator Long. Will you please talk to him about it, I would appreciate it. I understanding hearings are scheduled for June 21st and 22nd. Apparently, it is something that has just recently gone into the mill and even if the matter could be delayed so that the public could have more information on the subject and have more opportunity to express views, I think it would be helpful. Thanking you in advance, I remain, Yours very truly,



Bismarck, N. Dak., July 8, 1966. Hon. HARRISON A. WILLIAMS, Jr., U.S. Senate, Committee on Banking and Currency, Washington, D.C.

DEAR HONORABLE WILLIAMS: Thank you for the copy of S 2672 and the additional information concerning same.

After reviewing the material, I certainly do believe that such legislation would be of great benefit in protecting the American citizens against fraud and misrepresentation of Interstate Land Sales.

Following are a few reasons for approving such legislation:

1. Uniform administration;
2. Simplify supervision;
3. Better and easier enforcement;

4. Instead of each state examining the prospectus and projects, only one staff would be necessary;

5. Better qualified investigators;

6. I honestly believe that such legislation would discourage operators from fraudulent practices. Will do everything possible to promote such legislation by getting the support of our Congressman. Hope this will help the committee in some manner. Sincerely,

EDWARD HEER, Secretary-Treasurer.

JUNE 29, 1966. Mr. ROBERT J. JENSEN, Real Estate Commissioner, Real Estate Division, Department of Commerce, State

Office Building, Portland, Oreg. DEAR COMMISSIONER JENSEN: As you may know, the Subcommittee on Securities of the Senate Committee on Banking and Currency conducted hearings last week on Senate Bill S. 2672, the Interstate Land Sales Full Disclosure Act. The bill and an explanation of its major provisions are enclosed.

One of our witnesses, Mr. Samuel T. Frear, gave us very valuable information about the sale of extensive holdings in eastern Oregon. His testimony, and the articles he wrote last autumn for the Eugene Register Guard will receive careful attention by the Subcommittee. A copy of his prepared statement is enclosed.

I am writing to you at this time about a matter which came up during the questioning of Mr. Frear. In a discussion of the full disclosure principle, Mr. Frear said:

"* * * I think * * * the Oregon registration statement is a little overlegalistically drawn, and a little complicated to understand, and I think we should recognize that people who are buying this land * * * are not going to real estate brokers or lawyers or title companies or anything, and they need to have this information spelled out clearly * *

Much the same point was made about disclosure statements in general by Senator Mondale, who said that perhaps certain disclosures about the land should receive careful attention in a "fair comment” section prepared by the staff of the SEC.

We would appreciate any comments you may wish to give to the Subcommittee on the disclosure questi or any other matters raised by Mr. Frear in his statement or his articles, and we would also like to have two copies each of three recent Oregon property reports.

Our hearing record will be closed on July 10. We hope to hear from you by that date. Sincerely,




Portland, Oreg., July 6, 1966. Hon. HARRISON A. WILLIAMS, Jr., Committee on Labor and Public Welfare, U.S. Senate, Washington, D.C.

DEAR SENATOR WILLIAMS: Your letter of June 29 related to Senate Bill S. 2672, the Interstate Land Sales Full Disclosure Act, was received by my office on July the 5th.

You have asked that I make comments on the disclosure question or other matters raised by Mr. Sam Frear of the Eugene Register Guard. I have full knowledge of Mr. Frear's articles as published by his newspaper and I was interviewed by the reporter twice prior to the publication of his articles. While I have the greatest respect for Mr. Frear and the Eugene Register Guard, one of the finer newspapers in the State of Oregon, I must disagree with his statement: "* * * the Oregon registration statement is a little over-legalistically drawn, and a little complicated to understand * * *"

I am submitting for your evaluation as per your request, two copies of three of the subdivision developments under the jurisdiction of the Oregon Real Estate Commission. Two of the reports are concerned with Oregon subdivision developments and the other concerns itself with a large Florida subdivision which was personally inspected by one of the staff of the Division and much of the report written on the grounds of the development itself.

As you are undoubtedly aware, the Oregon Subdivision Control Law is basically a disclosure law. We make every attempt to inform the prospective purchaser of all of the important facts as related to the subdivision.

We have knowledge that some states in their public reports give material facts, such as the cost per foot in drilling a well. It is our opinion that in doing so unreliable information could be given the prospective purchaser. As for example as is given by at least one state: “The cost of drilling a well in this area will be at the rate of $6.00 per foot". While this may be true in one area of the subdivision, it may also be true that should the well driller strike rock or find other adverse conditions, the cost per foot for the well could be $9.00, $12.00 or even a higher figure. This was one of Mr. Frear's criticisms of the Oregon subdivision report when he visited me prior to his publication of the articles.

You will possibly recall that I appeared before the subcommittee concerning itself with fraud on the elderly during May of 1964. During my testimony I stated my opposition to Federal legislation wherever the states were giving adequate protection to the public as related to subdivision developments. As a staunch supporter of states' rights I remain consistent in this opinion. While I note that s. 2672 contains Section 9, paragraph (b) in which is stated : "Nothing in this title shall affect the jurisdiction of the real estate commission ... I cannot but believe this legislation could take jurisdiction where Federal authorities were of the opinion the state authorities were not fulfilling their obligations to the public. I would be most happy to be corrected if my opinion is incorrect in this matter.

We would heartily endorse legislation controlling national advertising as related to television, radio, magazines and newspapers and would encourage a statement that a publisher, broadcaster or telecaster is not liable for such false or misleading advertising unless he has knowledge of the falsity or has an interest in the subdivision.

We have been most happy with the cooperation and active participation of Federal authorities, such as the Security Exchange Commission, Federal Exchange Commission, Federal Bureau of Investigation and the Postal Inspector's Office. Our working together has made complaints involving subdiviisons almost nonexistent.

Please feel assured I appreciate your writing and requesting my opinion as to the proposed legislation regarding subdivision control and I wish you to know that my office will make every effort to cooperate in any way and at any time you should call upon us. Respectfully,

ROBERT J. JENSEN, Real Estate Commissioner.



Washington, D.C., August 22, 1966. Hon. HARRISON A. WILLIAMS, Chairman, Subcommittee on Securities, Committee on Banking and Currency,

U.S. Senate, Washington, D.C. DEAR SENATOR WILLIAMS: I would like to call your attention to several drafting defects in S. 2672 (Interstate Land Sales Full Disclosure Act), with respect to the application of this bill to the Commonwealth of Puerto Rico.

As you know, the bill regulates only land transactions involving use of instruments of transportation or communication in "interstate commerce." This phrase is defined in Section 2(7) as “trade or commerce among the several States, or between the District of Columbia or any possession of the United States and any State or other possession, or between any foreign country and any State, possession, or the District of Columbia, or within the District of Columbia.” With the creation of the Commonwealth in 1952, the term “possession" because an inarpropriate description of Puerto Rico, and use of this term, alone, in S. 2672 may be interpreted by the courts as indicating an intention to exclude Puerto Rico from the provisions of this bill.

In addition, Section 3 exempts the sale of securities by a real estate investment trust "regulated under any State or Federal statute" and Section 9 authorizes the S.E.C. to cooperate with the appropriate "State authorities.” Both of these sections would seem to exclude jurisdictions like Puerto Rico, which are not States.

Finally, Section 24 is replete with similar errors. The local courts in the Commonwealth of Puerto Rico are not subsumed in the phrase "territorial courts"; and removal to a Federal court is precluded only when the case is originally brought in a "State court." Hence, these sections raise further doubts concerning whether or not this bill applies to Puerto Rico.

If it is your intention to include Puerto Rico within the scope of this bill, it would be best to clarify this language. For your consideration, I suggest that the easiest way to correct the bill would be to include a definition of “State" within Section 2, such as the following: “State' means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Canal Zone, the Virgin Islands, or any possession of the United States." This definition is substantially the same as that in the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisors Act of 1940. The references to “possessions” in Section 2(7) and "territorial courts” in Section 24 would, of course, become unnecessary.

I would like to know if my suggestion meets with your approval and if you will be willing to secure the necessary amendments. Thank you for your time and attention. Sincerely,




Carson City, Nev., August 5, 1966. Hon. HARRISON A. WILLIAMS, Jr., Committee on Banking and Currency, Senate Office Building, Washington, D.C.

DEAR SENATOR WILLIAMS: In my telephone conversation with Mr. William Oriol, I was happy to learn that you had extended the hearing record open on Senate Bills 2672 as I had not written a reply to your letter in time for the previous cut-off date, July 10, 1966.

As I explained to Mr. Oriol, the State of Nevada does not have a subdivision act, a "public report” law or does it require a filing. Therefore our investigations have been limited in this field in the absence of certain authority.

You referred to the advertising of Meadow Valley Ranchos as appeared in the July issues of Coronet magazine and Frontier Times and asked my observation as implied in these ads.

Perhaps the land at one point is relative to the city of Elko as represented, but for the most part extends far beyond as is clearly shown on the enclosed plot.

As you can suspect these lands are for the most part sold through the mails outside the boundaries of Nevada as most residents of this state know the possibilities and future of such areas.

The representation as to the great potential growth is quite a statement, at least in my opinion, as it will be many years before any one will be able to resell and least of all resell the land at a profit.

The reference to the skyrocketing values in comparison with the Southern Nevada area of Las Vegas is unrealistic and unbelievable for many reasons. For instance, relative location to the population of the larger cities such as Los Angeles and Phoenix and other nearby areas from which much success has to be contributed to this southern area.

The Elko and Elko County area is dependent mainly upon the ranching industry as there is not the large industrial population that is needed in that part of the state to support the purchasers of these properties. It is inconceivable that there would be such an immediate influx of retired people to inhabit and pioneer this area.

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